The Quarterly Review of Economics and Finance, Vol. 38, No. 3, Fall 1998, pages 409--419 Copyright © 1998 Trustees of the University of Illinois All rights of reproduction in any form reserved ISSN 1062-9769 ROLE OF INTERNATIONAL CAPITAL Telecommunications in Latin America and the Caribbean: The Role of Foreign Capital CARLOS A. PRIMO BRAGA VOLKER ZIEGLER World Bank I. INTRODUCTION The last ten years have witnessed significant changes in the structure of the tele- communications sector in Latin America and the Caribbean (LAC). Privatization and liberalization (the lowering of barriers to entry to new operators in the tele- communications sector) have been pursued by most countries, although some relevant exceptions remain.l As a consequence, the number of service providers, the pattern of ownership, the sources of financing and the regulatory environ- ment have all changed dramatically. In this paper, we document these changes and discuss to what extent the observed growing role of foreign capital in this industry should be expected to continue. The paper is organized as follows. Section II documents the trends in priva- tization and analyzes the growing level of competition that characterizes the industry in the region. Section III discusses the role of foreign capital in the expansion of the telecommunications sector in LAC. In Section IV, the commit- ments of Latin American and Caribbean economies within the scope of WTO negotiations on basic telecommunications are reviewed. Section V concludes. II. PRIVATIZATION AND LIBERALIZATION IN LATIN AMERICA: WHAT'S NEW? It is often noted that telecommunications companies began as private enter- prises in many places around the world. By the 1970s, however, few were the cases in which the operators had remained as i~rivate companies (e.g., the Phil- ippines, Spain, and the United States). In most countries, telecommunications 409